KeyBank 2015 Annual Report Download - page 210

of the collateral based on the value of those securities. We generally hold collateral in the form of highly rated
securities issued by the U.S. Treasury and fixed income securities. In addition, we may need to provide collateral
to counterparties under our repurchase agreements and securities borrowed transactions. In general, the collateral
we pledge and receive can be sold or repledged by the secured parties.
15. Stock-Based Compensation
We maintain several stock-based compensation plans, which are described below. Total compensation expense
for these plans was $59 million for 2015, $46 million for 2014, and $38 million for 2013. The total income tax
benefit recognized in the income statement for these plans was $22 million for 2015, $17 million for 2014, and
$14 million for 2013. Stock-based compensation expense related to awards granted to employees is recorded in
“personnel expense” on the income statement; compensation expense related to awards granted to directors is
recorded in “other expense.”
Our compensation plans allow us to grant stock options, stock appreciation rights, restricted stock, restricted
stock units, performance shares, performance units, other awards which may be denominated or payable in or
valued by reference to our common shares or other factors, discounted stock purchases, and deferred
compensation to eligible employees and directors. At December 31, 2015, we had 66,728,574 common shares
available for future grant under our compensation plans. In accordance with a resolution adopted by the
Compensation and Organization Committee of KeyCorp’s Board of Directors, we may not grant options to
purchase common shares, restricted stock or other shares under any long-term compensation plan in an aggregate
amount that exceeds 6% of our outstanding common shares in any rolling three-year period.
Stock Options
Stock options granted to employees generally become exercisable at the rate of 25% per year. No option granted
by KeyCorp will be exercisable less than one year after, or expire later than ten years from, the grant date. The
exercise price is the closing price of our common shares on the grant date.
We determine the fair value of options granted using the Black-Scholes option-pricing model. This model was
originally developed to determine the fair value of exchange-traded equity options, which (unlike employee stock
options) have no vesting period or transferability restrictions. Because of these differences, the Black-Scholes
model does not precisely value an employee stock option, but it is commonly used for this purpose. The model
assumes that the estimated fair value of an option is amortized as compensation expense over the option’s vesting
period.
The Black-Scholes model requires several assumptions, which we developed and update based on historical
trends and current market observations. Our determination of the fair value of options is only as accurate as the
underlying assumptions. The assumptions pertaining to options issued during 2015, 2014, and 2013 are shown in
the following table.
Year ended December 31, 2015 2014 2013
Average option life 6.0 years 6.2 years 6.3 years
Future dividend yield 1.84 % 1.70 % 2.14 %
Historical share price volatility .382 .497 .495
Weighted-average risk-free interest rate 1.7 % 1.9 % 1.1 %
Under KeyCorp’s 2013 Equity Compensation Plan, the Compensation and Organization Committee has authority
to approve all stock option grants but may delegate some of its authority to grant awards from time to time. The
committee has delegated to our Chief Executive Officer the authority to grant equity awards, including stock
options, to any employee who is not designated an “officer” for purposes of Section 16 of the Exchange Act. No
more than 3,000,000 common shares may be issued under this authority.
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